Investors Rattled Ahead of Apple Earnings

Apple's stock has dipped beneath the $500 mark too often for comfort lately, resulting in a bit of panic among investors. The company that once could do no wrong is now under increasing scrutiny. With indications that iPhone sales may be lagging, it makes sense that Apple would be turning to the huge China market for customers. However, a bigger, cheaper iPhone just doesn't seem like Apple.

Investors' eyes are on Apple as the company prepares to announce its quarterly earnings report on Wednesday.

The company's recent stock market losses and several analysts' lowered expectations on iPhone sales suggest this quarter might not be as flush as some in its recent past.

Apple sank to a low of US$496.63 on Tuesday and closed at $507.88, up about 1 percent.

Investors' pessimism stems in part from the increasingly fierce competition in the smartphone market. Although Apple snagged the top spot in U.S. smartphone sales during the three-month period ending Dec. 23, Android was right on its heels, according to a report released this week by Kantar Worldpanel ComTech.

Apple grabbed 51.2 percent of sales during the busy holiday season, with Android taking second place with 44.2 percent. Worldwide, Android is still in first place, including in key markets such as China, the UK and Germany.

Go Big or Go Home

Samsung is leading the Android charge against Apple, thanks to the success of its Galaxy mobile devices. The Samsung Galaxy S III in particular has caught the imagination of consumers with its 4.8-inch display -- larger than the iPhone 5's 4 inches, and dwarfing the 3.5 inches on all previous iPhone models.

Samsung met some skepticism when it first launched the Galaxy S III, with some complaints that it couldn't easily be single-handed, but it has quickly become one of the most popular models on the market.

"Apple may be as surprised as I am with the popularity of larger phones," said Ezra Gottheil, senior analyst for computing practice at
Technology Business Research.

"People are carrying them in their bags or having larger pockets, and Apple's argument that you want to be able to use both sides of the phone comfortably isn't really holding up. People like large phones," he told MacNewsWorld.

They might like them so much that Apple would consider making a phone with a larger display, he said.

Rumor has it that the company might debut a 4.8-inch iPhone as early as this June at the company's Worldwide Developer's Conference, the China Times reported this week.

Rumors surface hourly about what may show up in a new iPhone, so even if this one isn't spot on, it doesn't mean the company isn't considering upping its screen size to meet demand, noted Gottheil.

"It's possible," he said. "Apple has said in the past they won't make a larger phone, but they say a lot of things. They will probably have to address the demand for larger screens but will want to give it its own twist."

While Apple has typically taken the approach of telling consumers what gadgets they want rather than emulating successful competitors in the market, the company is willing to acknowledge market preferences in terms of size and form factor, said Gottheil, pointing out that Apple's computer, tablet and music players come in a variety of shapes and sizes.

"The iPad mini and the MacBook Air [are] evidence Apple is willing to change sizes," he pointed out. "They recognize what's happening in the phone market overall is what's happened in established consumer markets like cars, where people want different sizes and have a lot of options open to them."

Semiconductor Switch?

One way for Apple to deliver a blow to Samsung could be to drop it as a chip provider. Since the companies are rivals in sales and in the courtroom, it's understandable that Apple would want to look elsewhere to find some of the hardware to power its mobile devices, said Jim Turley, principal analyst at
Silicon Insider.

One of the possible contenders for the job would be Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract chip maker. TSMC expects high-volume orders for its 20-nanometer chip over the coming year, CEO Morris Chang revealed last week.

Its technology is certainly good enough that Apple might be looking toward TSMC if it really is considering a switch, said Turley.

"It's great that TSMC is getting a big 20nm order," Turley told MacNewsWorld. "That's cutting-edge technology and every chipmaker apart from Intel likes to show that they're ... state-of-the-art too. Intel has used its presumed advantage in manufacturing technology to batter opponents for a while, so TSMC is understandably keen to show that it's in the game."

With a company as large as Apple, anything is a possibility, said Turley, and Samsung probably shouldn't be alarmed just yet over its chip business.

"It's obvious why the company would want to distance itself from Samsung, but it doesn't necessarily follow that it has to run into the welcoming arms of TSMC. It's certainly possible, but not a sure thing. There are lots of chipmakers out there," he pointed out.

Apple did not respond to our request to comment for this story.

Rachelle Dragani is a freelance reporter based in Brooklyn, NY. She enjoys staying on top of e-commerce deals, reporting on what new gadget is coming your way, and keeping tabs on anyone trying to hack into your info. Feel free to e-mail her at rachelle.dragani@newsroom.ectnews.com.